## Behavioral Option Theory: Foundations and Evidence |

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arbitrage behavioral decision theory BEHAVIORAL OPTION THEORY Black-Scholes buyers and sellers Call option buyers call option purchasers call option seller calls and puts Charles Noussair convex preferences descriptive statistics deviations discount relative domain of gains domain of losses downside outcome European options expected loss expected values Figure 1(a financial options hypotheses illusion of control implicit discount rates indicated Insert Table introducing a positive irrelevant outcomes Item N Mean Kovenock magnitude of irrelevant managers Margaretha Hendrickx Mark Olson Matheny models one-tailed tests option duration option pricing problems option purchase price option transaction options at discounts perceived option values percent Philip Bromiley piu(xi pixi positive exercise price possible outcomes potential loss probability p2 prospect theory put option buyers put option seller respondents risk averse risk neutral risk neutral valuation risk preferences risk-free rate selling a call Shapira Sugato Chakravarty Thomas H traded Trigeorgis underlying asset valuing real options zero exercise price